Forex reserves down $3.4 bn on weak euro

The country’s foreign exchange reserves fell $3.39 billion to $276.24 billion in the week up to May 7, as investors spooked by the sovereign debt crisis in Greece hammered the euro.

According to bank treasury officials, the weakening of the euro resulted in a fall in the value of the country’s non-dollar-denominated reserves, which are estimated at about 25 per cent of the total foreign exchange kitty.

This is the sharpest weekly fall in reserves since January 23, 2009, according to Bloomberg data.

“I would attribute it to the fall of the euro. The euro has been weakening ever since the sovereign debt crisis flared up again in the first week of May. The euro has fallen almost five per cent against the dollar since then,” said R V S Sridhar, head of markets at private sector lender Axis Bank.

In the week up to May 7, the euro fell 2.63 per cent against the dollar to 0.78. Over the period, the rupee fell from 44.54 to the dollar to 45.4.

Bankers said there was no major intervention by the Reserve Bank of India in the forex market, which is usually the reason for fluctuation in foreign exchange reserves. Foreign institutional investors sold equity and debt worth $875 million during the week, which also contributed to the fall in reserves.

Foreign currency assets fell $3.3billion to $251.47 billion in the week, according to RBI data. Gold remained unchanged while special drawing rights fell $75 million to $4.9 billion.

India’s reserve position at the International Monetary Fund fell $20 million to $1.3 billion. In rupee terms, the reserves went up by Rs 14,290 crore to the end the week at Rs 12,56,981 crore.